Good morning. I'm Bob Eckert, and welcome to those of you here today and those joining us via the webcast. We're getting a later start today, so the folks on the West Coast joining us via the webcast were able to get up at a reasonable hour. .

As you can see through our year-to-date results, we are well positioned to deliver another Christmas, just as we have for the last 66 years, as well as another strong year. We continue to be optimistic that Christmas will come, and Mattel will be well represented under the tree globally.

The focus of today's presentations will be on Mattel's strategies and opportunities. In years past, a lot of what we presented focused on product. You've already seen our 2011 lines at New York Toy Fair earlier this year, and you have no doubt seen how well we're represented on this year's hot toy lists and, of course, you get a good idea of our 2012 line next year again in February. Well, product and product innovation are key reasons for Mattel's ongoing success, and we continue to see our toys on various holiday toy lists.

We believe the Mattel story isn't just about product per se, but about strategic and global brand management, which is what we do best and what makes us the #1 toy company in the world. And the addition of HIT Entertainment and the Thomas & Friends brand will only strengthen our position as the #1 toy company and solidify one of the premier preschool licenses as a Mattel brand in perpetuity.

As I've always said, when we consider acquisitions, we ask the same 3 questions: Is it the right thing at the right time at the right price. We believe that this transaction fits the bill on all 3 counts, and Brian will spend a little bit more time this morning talking about Thomas.

Mattel recognizes, especially in these turbulent economic times, as investors or shareholders, you must constantly ask yourselves: Why toys; why Mattel; and why now. This morning's presentation will be framed up under that construct. I'd like to begin the morning with my thoughts on why toys; Kevin will focus on why Mattel; and Brian will walk through why now. And then we'll open it up for Q&As.

Our hope is that you will walk away with what we already know, that Mattel is a great investment. If your current market outlook is bearish, you can see Mattel as a good play given its dividend strategy, strong cash flow and outstanding TSR. If your current outlook is bullish, you can see Mattel as a good play given this potential for global growth, strong margins and disciplined financial focus.

So why toys? During my 11-year tenure at Mattel, it's turned out that the toy industry is a pretty good place to be. When I started out, hundreds predicted the toy industry was going the way of the buggy whip business due to 2 unique challenges: kids growing up faster and, therefore, leaving the toy space earlier; and the thought that video games would take over a child's playtime. Turns out kids have grown up faster and video games are now ubiquitous, but the toy industry is now bigger and stronger than it was 10 years ago.

There are number of positive sustainable points to cover when developing the case on why to invest in the toy space. First, the toy business is growing, and not just for the short term, but over the past decade. Over time, the industry has proven to be a steady growing business. Over the last 3 years, the toy industry has grown greater than inflation.

The toy business is also resilient. There've always been toys under the Christmas tree despite the economic ramifications of recessions, including the Great Recession, port strikes, various epidemics, ship shortages or container shortages. The toy industry overcame and grew. And despite the onslaught of the video game industry, the toy industry proved resilient and is now much larger than video games.

Toys have also proven to be more stable than the video game industry, which has declined 9% over the past 3 years. And the video game industry skews older in teen boys and men. And, yes, kids have grown up faster, but the core toy consumer remains between the ages of 0 and 8, representing about 3/4 of the industry which, by the way, fits perfectly with Mattel's sweet spot. In fact, according to a recent study, about 1/3 of moms want their kids to spend more time playing with toys and engaging in imaginative and creative arts play, and just as many moms want their kids to spend less time on the computer or with video games.

Third, the toy industry is scalable at a global level, because while children speak different languages and celebrate different customs, all have the potential to benefit from toy play. Toys allow babies to stimulate senses, practice basic motor and language skills. Girls and boys can exercise imagination and creativity while playing with action figures, dolls and fashions. Vehicles and track sets allow boys to pretend, experiment and challenge spatial skills. These common attributes of our ultimate consumer and decision makers can be leveraged very efficiently by global toy companies via shared toy development and shared marketing campaigns.

The toy industry is on demographic trend. If you want to look at the industry in terms of total consumers, there are 1.8 billion children in the world today. If you want to look at the industry in terms of a growing wealthy demographic, the world's grandparent population is growing. In fact, grandparents account for about 1/3 of the U.S. population and represent 42% of all consumer spending on gifts. That's $52 billion a year spent on grandchildren in the U.S. alone.

The toy industry offers a unique way to capitalize on favorable demographic trends in key developing and emerging markets, such as the growth of the middle class. In Asia and Latin America, the population of children and the burgeoning middle class is expected to grow by approximately 50% in the next 5 years. That's over 35 million new middle-class children. This new and emerging middle class will create the opportunity for us to broaden engagement with our brands as discretionary income and spending grow.

And finally, in addition to these sustainable points, the toy industry also has solid financials. The toy business is a cash business, delivering superior cash yields when compared to the S&P 500. These cash yields are driven by 2 consistent metrics: the toy industry has strong gross margins and is typically a low-investment business. It isn't capital intensive. Combining these facts with premise that it's a short-cycle business where taking an idea in a designer's head to the store shelf is roughly a year, merged with economic model that clears out old inventory relatively quickly and efficiently, and you have a great business model. You annually build inventory, sell the inventory, collect the cash and start over again.

Retailers annually build the inventory, sell the inventory, clean off the shelves and start over again. This cycle allows the industry to be flexible to changing consumer preferences and changing economic conditions. And speaking of changing economic conditions, the toy industry is fairly recession-resistant. As all of the parents in the room know, on all levels, we will self-sacrifice, but when it comes to our children, we're willing to spend, and this includes toys. And our low price points are attractive, which not only serves to broaden the appeal of toys, but also keeps toy giving as an affordable option.

As you can see, toy industry sales hold up relatively well in recessionary times, outperforming office supply and fashion apparel in nearly every economic down cycle. This in turn helps the toy industry stock prices to hold up relatively well and economically challenging times outperforming the S&P during both of the recent recessions.

So in summary, why toys? Because there are many sustainable attributes of the industry. It's growing; it's proven to be resilient; it's a global player that can leverage scale; it has favorable demographics and it's a great emerging market play; and because it has so many strong financial metrics going for it, cash flow, margins, low CapEx and short cycle, and it has proven itself to be a good investment in challenging economic times.

Now I don't want to steal any of Kevin's thunder as he comes up to talk about why Mattel, but I will point out how well Mattel has done during the last few economic downturns. We remain committed to focusing our business on delivering strong and sustainable shareholder returns.

And with that, I'd like to invite Kevin Farr, Mattel's Chief Financial Officer, to the stage to talk about why Mattel. Kevin?

Kevin M. Farr

Thanks, Bob, and good morning, everyone. As Bob noted, at Mattel, we believe the toy industry is alive and well, and is a good place to invest in long term, as kids around the world continue to play.

What I'm going to cover with you today is why Mattel is the best investment in the toy space. My message is pretty simple: Mattel is the best investment given its brands, its scale and its strong and consistent track record of generating shareholder value. First and foremost, we believe Mattel has the best brands in the toy space, period. We own the #1 brand in infant and preschool, the #1 brand in fashion dolls, the #1 brand in large dolls and the #1 brand in vehicles around the world.

Our brand position only get stronger when you include our other brands like UNO, Max Steel, Matchbox, Polly Pocket and Apples to Apples. And let's not forget we also manage a large number of premier Evergreen Entertainment licenses that we consider our own from great partners like Disney, Warner Bros., WWE, Nickelodeon and HIT, which will become part of our own portfolio when we close in 2012. Our brands are the foundation of what we are, and brand management continues to be a key ingredient to our core DNA. Our brands have been around for decades and, today, they are well-known brands of choice of 4 generations: boys and girls, moms and dads, grandparents and great grandparents.

When you think of Mattel, no doubt you think of our key brands, Fisher-Price, Barbie, Hot wheels and American Girl come to mind. Today, they account for over 2/3 of our total business. This is why we put so much emphasis on core brand management. We recognize that our own IP drives our company. To put our brand strength in perspective, our top 4 brands alone would be the largest standalone toy company in the world. We managed these brands to be premier consumer product brands, not just standout toy brands. Our brands have been very comparable to brands from other consumer goods companies in terms of size, recognition, global presence, stability and pricing power. We extend our brand management capabilities across our licensed entertainment portfolio. In fact, our proven leadership in brand management and our global reach makes us the strategic partner of choice for anyone owning toyetic intellectual property.

Our approach with entertainment licenses is simple: we want to partner with the best and be the best partner. This strategy is paying huge dividends for the company. The business is growing and now entertainment is about 1/4 of the company's total revenues.

We manage a diverse and evergreen entertainment portfolio because we treat these entertainment licenses like our own brands. We're constantly innovating the product while working with our customers to maximize their global reach. This is why we see strong evergreen brands in our portfolios, properties like Cars, Disney Princesses, Toy Story, Mickey Mouse Clubhouse, Batman, WWE, Dora the Explorer and Thomas & Friends, properties that never leave the shelf.

When acquiring -- when it comes to acquiring new licenses, Mattel offers a number of strategic advantages. Our worldwide distribution capabilities give licensors the ability to simultaneously build their brands globally. Our depth in key toy categories provide the broadest coverage on the toy aisle. It's certainly our strength in developing innovative product, our global reach and our depth in all toy categories allow us to successfully build their brands, as well as offer the most financial upside for a licensor over time.

We have proven that our license entertainment property brands can grow right along side our own brands. Disney Princess is thriving on the same aisle with Barbie and MONSTER HIGH, and are the top 3 doll properties worldwide. Our expertise allows Disney Pixar Cars to succeed along with Hot Wheels, and these are the top 2 vehicle brands worldwide.

In summary, our brands and our proven ability to manage them, whether owned or licensed, is the foundation of our success. It's easy to see why Mattel managed or owned 8 of the top 12 properties in the 2010 holiday season.

Scale. I've briefly mentioned scale when discussing our brands, but wanted to take a deeper look at why our scale makes Mattel such a compelling

investment. Simply put, scale matters in the toy business, and Mattel has a strong strategic advantage in this space. Universal play patterns, a brand-loyal consumer and parents worldwide who want the best for their child are contributing factors on how scale works in our business. Centralized product development means distribution advantages. Global brands mean marketing and advertising efficiencies. A significant supply chain allows for global procurement efficiencies.

Our international scale means we play in every region of the world, and our international strategy has allowed us to properly manage these regions as each market dictates. Our long history in international markets is a clear differentiator for Mattel. Mattel is truly a global company and has the most significant international business in the toy industry. Alone, it would be the third largest toy company.

Our long-term strategy into these regions also give us unparalleled insights as we develop a strong government, customer and consumer knowledge base. Our global scale means we can quickly share best practices throughout the business and have the ability to cross-fertilize management from our global talent pool.

We have 43 offices worldwide, more than anybody. From these offices, we serve over 150 countries. This investment in our infrastructure is now driving sales globally. Latin America is a terrific market for Mattel. Countries like Brazil and Mexico anchor this region and are great examples of the intersection of both growth and scale. Last year, we shipped 860 million, and this year, we're on track to ship about 1 billion, which is over 3x the amount of our closest competitor.

Scale has also allowed us to develop a superior infrastructure. This is evident in our supply chain where about 50% of our volume comes out of owned and operated manufacturing facilities. This manufacturing base allows us to have a distinct quality and cost advantage.

Over the years, we've been very good at making certain items, allowing us to maximize our plants' efficiency, allowing us to eliminate third-party vendor profits and allowing us to introduce and keep proprietary technology, which gives us a strategic cost advantage. This expertise in manufacturing also gives us a unique perspective as we negotiate third-party manufacturing contracts for the remainder of our product lines.

Our size and scale also allows us to leverage ongoing investments in consumer research. We continually research how a child plays and what a child wants. We have a number of permanent facilities staffed with Ph.D.s which focus just on that. Also, we test our toy concepts in advance of production, as well as test the marketing messages to ensure that they are on trend and will resonate with our consumers. These investments ensure the continued success of our brand portfolio.

And one final point on our infrastructure, our long-term global presence allows us to develop an incredibly diverse workforce and management team. We ensure the future success of Mattel by continuing to invest in the development of our people. The depth and diversity of our management ranks is simply outstanding.

Our scale, combined with our brands, also allow us to have a well-diversified customer base. In the last decade, retailers like Carrefour, Tesco, Ri Happy Brazil and Mexico's Walmart Bodega Aurrera, just to name a few, are now part of the Mattel Lexicon. We are able to translate our vast retail experience across channels and countries to the benefit of our retail partners. And our brand, the deep retail penetration, also allows Mattel to leverage the non-toy space for consumer products, which further expands opportunities for brand engagement with consumers.

At Mattel, we believe that our financial focus remains the key reason why Mattel is a good investment. Delivering consistent growth, building operating margins, and generating and deploying significant cash flow remains our global strategic priorities. The expression that summarizes Mattel returns remains consistent value creation. As Bob pointed out, Mattel has proven to be a consistent player in an inconsistent world. And as I've talked to you in the past, the metric we use to prove this out is TSR, total shareholder returns.

As most of you know, TSR is a combination of share price appreciation and dividend payout and can be broken down into 3 key components: profit growth, cash yield and multiple. TSR is essentially how we track our performance in creating and delivering shareholder value. Our goal remains to deliver top third or top quartile TSR, and we take this concept very seriously and tie our compensation to it. When our shareholders get paid, we get paid. So as the current management team took over in May 2000, Mattel has generated an average annual TSR of 11%.

Meanwhile, over that same time period, S&P returns have been slightly negative. More recently, over the last 5 years, Mattel delivered TSR of 10%, driven by 8% profit growth, free cash flow yield of about 6%, offset by a reduction in the P/E multiple of about 4%. This performance places us in the 89th percentile of the S&P 500.

Over the last 3 years, we've enjoyed similar success. We delivered annualized return to our shareholders of about 19%. That places us in the 90th percentile. In the last 12 months, Mattel continues to perform, delivering 17% TSR. In short, Mattel has proven to be a consistent performer in an inconsistent world.

As I mentioned earlier, TSR is a combination of share price appreciation and dividend payout. If you look over the same time periods, dividend is driven over 1/3 of our performance. We continue to believe that our past history is a good indicator of where we will continue to go. We're committed to delivering consistent results in achieving our long-term performance targets. To grow sales in the low- to mid-single digits, deliver gross margins of about 50%, maintaining advertising spend of 11% to 13% and SG&A of about 20% to 21%, with an overall goal of about 15% to 20% operating margins.

As we move forward, we believe we will continue to grow over time given our brand portfolio and scale. This consistent growth, in combination with our continued focus on cost management, will allow us to sustain high gross margins and to leverage our SG&A. Improving operating margins and maintaining a relatively small annual CapEx expense will allow us to continue to deliver an outstanding free cash flow yield.

Speaking of cash, it's no secret that Mattel has a cash-friendly business model. Over the past 10 years, we have generated $7.8 billion in cash. The consistent cash generation gives us a head start on our TSR performance, and in each of the last 3- and 5-year periods, we've generated average cash -- annual cash flow yields of about 6% to 8%.

While our financial focus allows us to deliver superior TSR, it also gives us an opportunity to effectively deploy cash flow. We have a proven track record on capital deployment. We've maintained a consistent and disciplined approach to capital deployment, which we have communicated to you in the past. We'll focus on maintaining a strong balance sheet, targeting year end cash of $800 billion -- $800 million to $1 billion, and we'll continue to invest in our business, with CapEx going forward averaging about $175 million annually, focusing on areas that deliver a high return to our investors. And we'll continue to return excess cash to shareholders, first, through paying an attractive dividend, a key contributor to strong TSR.

We have delivered double-digit dividend growth in each of the last 2 years, and we plan to continue benchmarking top quartile dividend payouts. Our goal is to consistently increase the dividend with EPS over time, while maintaining a 50% to 60% payout ratio. We currently pay in the 83rd percentile in the S&P 500 and then top 10% of NASDAQ 100 companies.

Beyond the dividend, we will continue to opportunistically execute share repurchases and acquisitions. During the past decade, Mattel's EPS growth was higher than earnings growth, as we utilize a portion of our improving cash flow to shrink shares outstanding. In fact, since 2003, when we put our capital deployment framework in place, we have reduced the shares outstanding from about 437 million in 2002 to 339 million today, a 22% decline. We will continue to look at share repurchases and M&A through a TSR lens and execute opportunistically.

Over the past 10 years, we've generated $7.8 billion in cash and have deployed it effectively. During the 5-year period of 2001 to 2005, we returned about $1.6 billion to shareholders in the form of dividends and share repurchases. By building up cash reserves and reducing debt, we've improved our balance sheet and have been able to accelerate this deployment over the past 5 years, returning $2.9 billion to shareholders, an 81% increase.

As I mentioned earlier, our management incentive program is based on pay for performance. We don't get paid unless we deliver for shareholders first. Our short-term incentive compensation is based on 3 measures: operating profit, free cash flow and gross margin. And our long-term incentive compensation is based upon not -- net operating profit after tax less of capital charge and TSR.

So in summary, as you can see, our brands, our scale and our financial focus are very compelling reasons why Mattel is a great investment. We believe our consistent disciplined approach to business will continue to reap benefits in the future.

And with that, I'd like to introduce Bryan Stockton, Mattel's Chief Operating Officer, who's going to talk to you about why Mattel is a great investment now. Bryan?

Bryan G. Stockton

Thank you, Kevin, and good morning, everyone. So Bob took you through why the toy industry is a good investment. Kevin made the compelling case for why Mattel. And now, I'd like to spend some time on why Mattel is the best investment to make now.

At Mattel, we never stand still. We're always looking to move forward. As stewards of some of the most iconic toy brands and, arguably, some of the most particular of consumers, we can't rest on our laurels. Mattel's portfolio of brands, combined with its portfolios of countries and customers and its focus on financial discipline, doesn't just provide the level of risk mitigation, it also provides opportunities to grow the business. For example, in the fall of 2008, at a time which couldn't be more critical for the toy industry, the world's economy essentially shut down. Rather than write-off 2009, Mattel decided to move forward, realizing that those companies that deliver in tough times would be better positioned to capitalize when times improve. And Mattel did move forward. Despite significant economic headwinds and the cautious retail environment, Mattel delivered in 2009. Mattel capitalized on this momentum and delivered in 2010, and Mattel is delivering in 2011.

So why Mattel now? Simply stated, Mattel has a culture where the status quo is simply not accepted. Our core consumer may be loyal to our brands, but they don't want the same toy twice. So innovation and invention are key to our success. But that's not the only metric on which we measure ourselves. As we move forward today, we remain focused on 4 keys to delivering success: developing strategies to grow our business, optimizing our structure to move forward, developing our people and creating an innovative culture.

Growth of Mattel isn't by happenstance. Our growth strategies are well thought out and executed. We're growing because we know how to develop great brands like Barbie, Hot Wheels, MONSTER HIGH. We're growing because we have the foresight to acquire brands that are category leaders, brands like American Girl, Fisher-Price, UNO, Apples to Apples and, now, HIT Entertainment. And we're growing because we have a strategy to partner with great brands like Disney, Warner Bros., Nickelodeon and WWE.

So before I continue, let's take a moment to discuss our latest acquisition, HIT Entertainment. While we're acquiring a host of well-recognized brands like Barney, Bob the Builder, Fireman Sam and Angelina Ballerina, I want to talk about the centerpiece of the acquisition, Thomas & Friends. Thomas is one of the great preschool brands. Having consistently ranked as one of the top toy brands in the U.S. and abroad, and one that's loved by generations of moms and kids around the globe where the heritage spans more than 60 years and which includes more than 130 characters brought to life through rich content, toys and consumer products. It will become one of our top 5 core brands joining Fisher-Price, Barbie, Hot Wheels and American Girl when the deal closes in early 2012.

The Thomas business model is very consistent with our own and features a strong consumer products business, which is about 2/3 of total revenues, complimented by an entertainment business. The anchor of the consumer products business is a robust toy licensing business. And as Bob mentioned the other day, we consider these businesses to be in our wheelhouse. We already know the toy line. We've successfully run the Thomas plastic and diecast business for the past 2 years. And we look forward to expanding the line when the very attractive wood license reverts back to us at the end of 2012. We already know consumer products licensing, having run successful global licensing businesses with our existing brands for decades.

More than half of Thomas' revenues come from outside the toy aisle, and we believe the depth and experience of its consumer products licensing team fits well with Mattel's key growth strategy to build and create franchises. And we know entertainment and how to leverage content throughout the distribution pipeline from the successful Barbie DVD business, through Max Steel's Temple Entertainment in Latin America, and to MONSTER HIGH with it use of webisodes, music videos and TV specials. We see a number of potential revenue synergies when you combine Mattel's experience with the Thomas & Friends brand.

We know from consumer research that Thomas is a strong brand, where in many cases, moms and children want to engage with the brand in more ways than are available today. For example, in the toy space, we see opportunities to introduce new play patterns to broaden the way the children play with Thomas. As you know, the foundation for Thomas begins with strong content and compelling storytelling. And through those stories, we plan to introduce new adventures, new geographies and new characters. As brand owners, we can better align content creation and product development in new and exciting ways.

Second, we can expect to grow this business globally when we bring to bear our unprecedented international scale, especially in the developing and emerging markets in Latin America and Asia. We've seen good global growth since we received the diecast and plastic license, and we see continued opportunities to grow distribution above existing markets and new markets.

And third, we see opportunity to build on many of the existing partner relationships that it has the day. For example, in consumer products, many of the key partners that work with the Thomas brand we know well from our consumer products licensing experiences with Barbie, Fisher-Price and Hot Wheels. When we think of all of these brands together, the story for retailers and consumers becomes even more compelling.

Similarly, the a world of content placement and distribution, we know most of the world's major broadcast partners through our media buying relationships and our efforts to place content such as Barbie movies. As we go forward, we see opportunities to align with more global partners with greater household penetration, making Thomas content available to even more people in more places.

We also see a number of operational synergies. HIT Entertainment has a great talent base, with strong competencies in content production, management and licensing. We work in a creative business and understand the value of strong and talented leaders, teams and people. We plan to move much of the Thomas product manufacturing in-house, which will allow us to better sweat our assets and save vendor market. And by leveraging the best talent from both organizations, we will improve our licensing business, augment our capabilities on the content production side and realize the efficiencies in our back-of-house operations.

In short, we are excited about the acquisition of HIT Entertainment. It's absolutely consistent with our global strategic priorities to grow our core brands, expand our international footprint, optimize entertainment and build new franchises.

Now Mattel has over 600 years of brand building experience. What we've learned is it's not just about the toy, it's really about the play pattern, the toy, the advertising, the marketing, the licensing programs and, most recently, the content. It's that depth of brand management experience that's given us core brand momentum. It's that experience that allowed us to take a 50-year old fashion doll and make her relevant again.

The Barbie turnaround over the last couple of years has been nothing short of outstanding. It's that experience that allows us to continue to build the American Girl experience. We take these successes and we apply them to our other brands and will grow the company globally.

We also had entertainment momentum. It isn't a happy accident that we have our current roster of entertainment properties. Our proven license performance and brand management experience provide us with a strategic advantage when properties become available. Licensors know that toy development is essential to growing their brand franchise. And they trust the best. Our entertainment portfolio is truly evergreen and well positioned to continue to be a force of retail with most evergreen brands like Cars, Toys, Dora, WWE and the like, having never left the retail case since their inception.

In adding to the momentum in core brand and entertainment brands is the fact that we have momentum across our portfolio of countries and brands in our international business. For years, we've been seeding our franchises around the world. This deliberate disciplined strategy provides us the opportunity to grow as vibrant economies emerge and branded toy markets accelerate. We're growing in every region of the world. And the strength and depth of our brands will allow us the opportunity to continue to grow category share in different regions.

Our ability to grow is also supported by our proven ability to create new meaningful intellectual property. MONSTER HIGH has simply become a sensation. We were able to take the insights and understanding of those awkward moments that teens experience in their high school years, but the powerful bonds of friendship and the challenges of just plain fitting in to create an edgy and fun storyline built around a monster sheet theme. Launching this concept as the brand MONSTER HIGH, not just a toy line, but a content created for traditional publishing, as well as the web and social media sites, and a robust line of consumer products has created an overall new brand success. We're taking the lessons learned from the creation of MONSTER HIGH and are applying them to the development of new properties through our franchise management focus.

In the end, moving from a toy mindset to a franchise mindset, while broadening thinking to include all of the opportunities to communicate brand content and consumer product's potential, improves profitability, while increasing the probability of success. And Mattel is well resourced to capitalize on growth opportunities that come our way. Acquisitions have played a major role in Mattel's story for the past 50 years, with over 50% of our revenues having been acquired.

With our scale and our cash flow, we have the ability to invest, acquire or license new brands, as well as fund initiatives to grow our existing businesses both in the short and long term. For example, we've been investing in many countries to improve Fisher-Price brand messaging. We're just rolling out this new messaging and believe it will resonate around the world and be a catalyst to grow the Fisher-Price brand globally.

We're also working to optimize our internal structure to accelerate growth. As I've discussed with you before, our North American reorganization, currently under way, will create global brand teams to design products for the world and allow the North American marketing and sales teams to better align with our customers and consumers. Separating these duties and applying the international subsidiary-like approach to North America will allow us to free up more resources to focus on growing the business. We continue to believe there's a lot of opportunity to grow in the U.S., just as we saw through our clustering restructuring in the mature markets of Europe.

And to support that structure we need to continue to develop our people. At the top we have an experienced team, including Bob, Kevin and me. And when we look across the entire leadership team, we have over 800 years of experience in every important aspect of the business from designing, manufacturing and shipping to sales and marketing. And because of our top brands and our great corporate culture, we attract and retain the best and the brightest in the business. We've been recognized by Fortune magazine as being one of the best companies to work for, and we've also been recognized as a leading corporate citizen by Corporate Responsibility Officer Magazine.

And since innovation is critical to our business success, we're also focused on creating an innovative culture. We already have a strong track record with more than our fair share of top toys in the industry. And while many people think about the toy itself when they think about innovation, at Mattel, we think true innovation comes in many forms. American Girl is a great example of marketing innovation. The doll isn't feature packed; it doesn't walk or talk or eat, but this wasn't a breakthrough product, it was about a breakthrough brand positioning. During the last quarter of the century, American Girl Brand has sold over 20 million dolls, a 135 million books and welcomed 40 million visitors to its 11 retail stores and achieved a very profitable $7 billion in sales.

And as I just reviewed, MONSTER HIGH is a perfect example of great product innovation combined with fantastic marketing innovation. The product and package is clearly unique, very innovative, and the storyline is communicated through innovative content and content delivery. In fact, the MONSTER HIGH website had almost 2 million unique visitors before the product even reached the retail shelf.

As labor costs have continued to rise in countries important to toy manufacturing, we've developed numerous breakthrough and innovative projects to reduce the amount of labor it takes to make a toy. These productivity improvements have been driven primarily by our continued lean activities, technical innovations, as well as decreased automation and mechanization. For some of our products, we've been successful in reducing the amount of labor by solid double-digit percentages.

This is an exciting time to be working at Mattel, as we evolve the company from toy to play, from toy management to brand management and from worldwide leader to global leader. And we're committed to our 4 keys to delivering success: developing strategies to grow our business, optimizing structure to move forward, developing our people and creating an innovative culture.

Thank you. And now I'd like to ask Bob and Kevin to join me on the stage so that we can address your questions.

Question-and-Answer Session

Robert A. Eckert

Thank you, Bryan. We do have some time for Q&As. We do need to repeat the questions for the benefit of those joining us via the webcast. So Margaret wants to begin.

Margaret B. Whitfield - Sterne Agee & Leach Inc., Research Division

I wondering how the acquisition of HIT changes the longer-term opportunities for margins, both gross margins, operating margins and expense ratios such as advertising and SG&A.

Robert A. Eckert

So the question goes to how does the acquisition of HIT support our goal to expand margins. Kevin?

Kevin M. Farr

I think with regard to our metrics, we talked about growing low- to mid-single digits. I think that will help us grow on a global basis. I think there's a lot of opportunities with regard to growing the brand. And as we add the wood license and keep the diecast and plastic in perpetuity, I think that will the top line. The business is 2/3 licensing business and 1/3 entertainment, and it is a very profitable business. So I think that helps us with sustaining gross margins of around 50%. And obviously, we can leverage this brand across our global scale and should help us drive operating profits as we look to move from the low end of the range of 15%, driving to the higher end of the range of 20%.

Robert A. Eckert

Linda?

Linda Bolton-Weiser - Caris & Company, Inc., Research Division

You talk a lot about globality of your brands, applying them all over the world. Can you talk about American Girl, and if you think there's any way that strategically you can have that be a global brand, because its so American history focused. And then secondly, in terms of the P/E multiple contribution to your total shareholder return, why do you think the P/E multiple aspect has been a negative contributor? And do you think there's anything you can do as a management team to change that? Because the rest of the story is certainly great.

Robert A. Eckert

So there's 2 questions. First is about making American Girl more than American Girl in terms of globalizing that brand, and the second one has to do with the price/earnings multiple impact on the stock price and on total shareholder return. Let me start with American Girl, because it's a question I've talked to Ellen for the last 11 years. Today, American Girl is really geographically confined to America because of the economic model that drives that business. They are expensive dolls built around unique content, and the unique content has to do with American history. And so as we look around the rest of the world, there just are not today that many economies that have a sufficient number of families willing to spend that sort of money to justify the content we would have to create locally. That said, as Ellen and I have talked over the years, we want to be the ones to figure out the puzzle. So we have some ideas. We never say never, and I think you'll see over the next couple of years different experiments we'll be doing to see if there's an opportunity to make American Girl more than American Girl. The second has to do with the P/E multiple. I'll also take a shot at that. Kevin feel free to chime in if you want. The answer is the multiple has been a drawback on our total shareholder return, and it's the one thing we really don't influence well. We put together what we think is the compelling reason to invest, and investors make the decision what they're willing to pay for that asset. If you look at our history, we've been consistent TSR performers over the last decade, outperforming either others in the toy industry or the S&P 500 and it is a cash flow business. But we don't control the multiple, don't try and influence the multiple beyond communicating as regularly as we try to do, about why we think this business is a good business. And if you're an investor interested in strong sustainable cash flows, which certainly I am, we would argue we want to be along Mattel, but we don't make those decisions. We can just communicate and let others make those decisions.

Kevin M. Farr

Yes, I think as we continue to focus on our strategic priorities to grow consistently, expand our gross and operating margins and be very disciplined and opportunistic with regard to the generation of our cash and deployment of cash, I would expect to see improvements in our price/earnings multiple.

Unknown Analyst -

I was curious if you could talk about how the changes going on in China are going to impact your business over time, and given how much of your product, either you produce or your partners produce there, labor inflation compounding in the double digits and several other pressures. And I'm talking about maybe what it means for you in China. And then, also, what does it mean for the price of products in the U.S. as they're imported back and the elasticities that you're seeing as you raise prices as much as necessary?

Robert A. Eckert

Well, I let Bryan talk about the elasticities. The question has to do the environment in China, the inflationary environment in China for labor and transportation and the infrastructure, which is the largest place of manufacturing for toys. And then secondly, as that implies price increases, what does that do to demand. Let me start with the environment in China. It is inflationary. It is higher-cost labor, higher-cost transportation. Globally, our raw materials are higher cost, and we have had to pass price increases along despite the efforts we've done on cost reduction over the last several years. We've made really good progress on cost reductions. But the environment is such that I expect that cost will continue to rise and our prices will likely continue to rise with those costs. Ultimately, I think you'll see the manufacturing of toys. And remember, we're one of the few companies that manufactures toys that is also a branded company and we manufacturer in places other than China, including Thailand, Malaysia, Indonesia and Mexico. But I think that concentration of toy production in China will over time further inland into China, which is lower cost today and, ultimately, move to other markets like Vietnam. And we're starting to see experiments now with some of our vendor contract plants experimenting with Vietnam, whose infrastructure isn't quite ready yet but is emerging quite quickly. So I do see the continued evolution of toy manufacturing. There was a time that a lot of the toys were made here in the United States and then in Mexico and then over to Taiwan, Hong Kong. Now we're in Southern China. I think that evolution will continue as economies improve when the manufacturing industrial revolution comes into a market as we've now done in Southern China. Bryan?

Bryan G. Stockton

I'll build on the China question from a slightly different angle. As the Chinese economy grows and prospers and the middle class grows, that creates a larger audience for our toys from the commercial side of the business in terms of selling toys through various retail partners in China. So that helps us grow the commercial side of the business. So that's a positive to what's going on in China. As it relates to pricing, as Bob said, we're very mindful of doing 2 things when we take pricing: Number one, we know that we're trying to price to achieve our long-term gross margin target of about 50%. But as we do that, we need to be mindful of making sure that we're delivering value to toys to kids around the world. That's why we're spending so much time focusing in on innovation and how do we create more magic in the toys. And a couple of great examples would be, for example, last year Barbie Video Girl. There was a tremendous innovation by putting digital technology into the doll, and that doll was a higher-end price point. And we literally sold out of her. This year, Hot Wheels Wall Tracks is another innovation that tries to offset some of the pricing pressures that we know consumers are facing. But in the end, as I think Bob pointed out in his presentation, toys tend to be recession-resistant. And as people are looking at the prices of apparel, gas, other things, toys still remain a value, but we have to continue to grow our category share by offering more innovation.

Unknown Analyst -

Couple of strategic questions and then one quickie. On acquisitions, HIT is the biggest acquisition you've done on your tenure, Bob, and one of the biggest in the company's history. What other opportunities are there even -- or are there any other opportunities kind of within the traditional toy space? And how -- has there been any evolution in your thought to acquisition sort of outside your comfort zone here of traditional toys? Second, the HIT acquisition absorbs a fair amount of cash, and you've got this looming MGA issue that isn't fully resolved. Would either of these have any material impact on your willingness to deploy cash for capital deployment, either another acquisitions or in share buybacks? And the quickie is, does the flooding in Thailand have any impact on your production there?

Robert A. Eckert

I'll start. The questions have to do with acquisitions and what opportunities we might see. Secondly, as we devote cash to things like the acquisition, what impact might that have in our deployment going forward. And thirdly, more specific question about the floods recently in Thailand where we do manufacture, just outside of Bangkok. Let me start going backwards, forwards, and feel free to chime in if you want. We did lose a day or two of production last week in Thailand. The plant is running as we speak, and so we did have a short downtime. The good news is at this time of the year, we're not running the assets full-out, the way we are in the spring of the year. But we did lose a little bit of production out of Thailand, but don't expect it to have a material difference.

Unknown Analyst -

No significant inventory loss?

Robert A. Eckert

No. The question was on inventory loss. No significant inventory loss in that plant. We do run these plants pretty efficiently and lean, and we don't keep a lot of inventory in the plants, fortunately. Secondly, as it relates to capital deployment, if you had asked me 10 or 11 years ago, would we have deployed the cash that I expect we are going to be able to generate a fair amount of cash, which we have, would we have such a small portion of that capital deployed to acquisitions. I would now fast forward 10 or 11 years, I'm surprised that we haven't been able to make acquisitions over the past. My mindset has not changed and isn't going to change. Two things I've said repeatedly over the last 10 years. Most acquisitions are not good for the acquiring company shareholders with the benefit of hindsight, and when we make an acquisition, we work really hard to make sure we're going to beat that. And secondly, we have to find the right thing at the right time at the right price. We've certainly been exposed to most everything in the toy space I would expect over the last 10 years and haven't been able to put the combination together of the right thing, right time, right price. Our focus continues to be on toys or things really close to toys. If you look at the history of the toy industry, Mattel and other large toy companies, when we're close to toys, we do pretty well. And when we get too far out, we don't do really well for the shareholders. So I still think we're a toy company. We're a play company, but we certainly recognize, as we've seen and Bryan talked about in American Girl, in Barbie, in MONSTER HIGH, being centered in toys is important, but there is more to our business today than the toy business. We don't talk about it much, I think, probably not enough, but if you look at the Barbie business, there's about $1 billion worth of global revenues at retail that come outside of the toy business. And the licensing side, the consumer product side of Barbie, has been really important over the history of the brand. And so when we see things like Thomas come along that does have both an important toy component, which we know well, but also a consumer products business that aligns well with our existing Barbie business, that's why we say it's in our wheelhouse, both the toy side and the consumer product side. Harry Nunn [ph] ?

Unknown Analyst -

Just one quick one, and then one a little more strategic. For some of the more recent brand introductions like MONSTER HIGH and some the new licenses that have come on, has the distribution of revenue across, I guess, major retailers or kind of the #4 to 7 on the top 10 retailer list been different than the corporate average? And then second, bigger picture, as online grows as a percentage of total retail around the world, like, how does that change the environment that you guys operate in and the relationships with retailers?

Robert A. Eckert

So the question has to do with the retail environment, and specifically growth outside of the top 3 and with the emergence of the Internet being a good growing source for toy consumption, what are the implications to us. Bryan?

Bryan G. Stockton

Thanks, Bob. If you look at what's happened with our business, because we're growing quickly in international, our international portfolios become a much larger part of overall Mattel than it was just 10 years ago. We used to be about 32%, 33%. Now we're about 50% x American Girl in terms of the portfolio. So we've been able to broaden our portfolio of customers. If we look what's happening today with our customer base, particularly because of the efforts we've made to create franchises, picking up MONSTER HIGH in particular, we're seeing new customers come into our business, customers like Hot Topic, for example, is a big MONSTER HIGH customer. We've done some other things. So as we gain franchise strength, we're not only expanding the retail base, but we're expanding our footprint within the store. The last piece of the question is what's happening with online. It's very interesting. Online is growing in a number of our countries around the world. And what we're seeing is both our customers' online business growing, and we're working hard with our customers to partner with them to get the right assets and right promotions partner with them. But also, Amazon is growing in many, many countries and is now, in many cases, in our top 5 or 10 customers in each country. So it's an important part. It's a growing part. We think we're positioned well with the right partners to get us online.

Robert A. Eckert

And brands are really important in online retailers. When you're sitting in front of your screen making decisions, we are fortunate to have those power brands. I think that's really important to us, and our online customers understand that.

Unknown Analyst -

[indiscernible] Whether it's going through the traditional brick and mortar or whether it goes through their online business, do the economics at all differ for you?

Robert A. Eckert

The economics? Not significantly. Every retailer has got a little different business model, and our relationship with them is a little different depending on how they want to run their business and what we can do to support their business. But I wouldn't say there's a broad sweeping change in the economics of the online model versus the brick-and-mortar model from our vantage point. Margaret?

Margaret B. Whitfield - Sterne Agee & Leach Inc., Research Division

Just a question on [indiscernible].

Robert A. Eckert

The question is on the wood rights for the Thomas & Friends line that will come to Mattel after the current license expires. Historically, it has been about half of the size of the diecast and plastic business, which we already support globally. And the question is, will the wood right -- would wood change as a portion of the entire Thomas pie, we don't know yet. It's too early to tell. What I can tell you, whether you look at Thomas or look at WWE as 2 recent examples, those were both licenses that had strong toy lines before we acquired the rights to distribute those brands. Both of them have grown significantly under our stewardship, not just expanding distribution globally, although expanding distribution globally is one of our key strengths, but the basic toys, even in mature countries, have performed better under our stewardship. And I think that is more evidence of the capability of our folks to create the magic and bring properties to life. To me, that's the best example we have, is when you take something that's been in the market for 10 or 20 years and you put it under Mattel's watch and the business grows quite rapidly. The only thing different in those is who's creating the toys and selling the toys. So can we do more with wood? Certainly, we would hope to. We'll have to see how that plays out. We have one in the back.

Unknown Analyst -

Given the fact that you guys recently meaningfully expanded your preschool segment, I was hoping you could give us a little bit of color whether it be on your business or overall industry trends on that preschool business. We've seen birthrates come down the last few years in the United States and a number of other key countries. That segment for you guys has been -- it rebounded last year, maybe not as strongly as some of your other segments. This year, down a little bit, but it's a little bit hard for us to really tease out how much of that came from Sesame Street. So I guess 2 questions. One, could you characterize your own business pulling out the effects of Sesame Street in the preschool segment in the last couple of years? And two, could you characterize -- give us some color on general trends that you're seeing in the preschool segment? Are there some secular issues over and above sort of what's going on with the economy?

Robert A. Eckert

That's good. I'll start, and Bryan can continue. The question has to do with the preschool category. And our views on the preschool category, given that in some mature countries the birthrate has dropped and how we feel about that business and how we feel about our Fisher-Price performance over the last couple of years, particularly as one of the important licensees, Sesame Street, left our stewardship. So I'll start. Bryan, you can continue. I tell you we love the preschool business. Talk about our wheelhouse, we've done historically well in preschool. It is a growing market, a growing segment of the toy industry, and we performed well. And it generally gained share within that category over the last decade that I've been around the toy business. Fisher-Price is a great, great brand. And we have some great licensees within the Fisher-Price brand line. So we continue to think it's a really important segment. It's done -- we have some tailwinds in the birthrate in this country for a few years, which was unusual because during the early part of my tenure we were seeing birthrates decline, and then they ticked up a little bit. I think it was starting in maybe 2006 for a year or two until the Great Recession hit, and then they've dropped back down again. That's offset by per capita spending on little kids. People are willing to spend more, grandparents, trust me, I know. I have experience. Grandparents are willing to spend on their grandkids. And we are a growing and important part of the population in mature markets like the United States. So we continue to love the category. Fisher-Price, we've talked about over the last couple of years, can do better. It was really a key, key growth engine for Mattel in the early part of my tenure, and it's leveled off over the last couple of years. And Bryan and the team are actively engaged in that. And I feel very good about the progress we're making, although it's still early. We still have more work to do. The good news is, we're starting from a position of strength. We're not starting from a position of significant decline, as we were on Barbie a few years ago. So the brand is already doing well in a good category of the toy business. But we want to take this opportunity to see if we can make things happen a little bit faster at Fisher-Price. Bryan?

Bryan G. Stockton

Sure, Bob. One of the things that we've seen over last 10 years across the globe as birthrates go up, birthrates go down, and it doesn't seem to impact the growth of the infant/preschool category, because the phenomenon that Bob identified, which is per capita spending, continues to go up as households begin to have fewer and fewer kids. Parents are spending more time with their kids, and they know that toys are an important part of childhood development. So the category continues to grow almost in spite of birthrates. It is the largest category in the toy business across the world, and it's a category that we compete very well in. Having said that, we have a number of parts of the world where the category is underdeveloped. For example, Latin America, we have a good share in Latin America, but this is a brand-new category for Latin American moms. And as they learn more about the value of toy and play, the development of their kids, we see that, that category growing as well. Additionally, the Fisher-Price brand, we love it here in the U.S. It's the top brand in terms of performance in the toy industry. Outside the U.S., it's a much of younger brand. It's not as old as it is here in the U.S. So we still have some room for brand growth and brand development outside the U.S. So we're positive. And as Bob said, the work we're doing right now in positioning, we're feeling positive about Fisher-Price. We've spent a lot of time this year focusing on in-store execution to make sure that the product is out where consumers are going to be shopping over the next 2 months and sharpening the message. And some of you may have seen the new advertising that's been on TV for the last, I think, roughly 3 weeks. And that we're getting a positive response from consumers about it. So we're feeling like Fisher-Price is heading in the right direction. Do you want to add anything, Kevin?

Kevin M. Farr

No, I think you covered it, Bryan.

Unknown Analyst -

In the early part of the decade, Barbie in the U.S. was an offset to all the positive things you guys were doing elsewhere in the portfolio. And somewhere along the line a couple of years ago you figured it out, and it's been growing ever since. And I guess I'm curious to understand with the benefit of hindsight, why do you think it went into decline before? What are you doing differently in the last couple of years that you weren't doing? And what gives you confidence about the forward trajectory for Barbie in the U.S.?

Robert A. Eckert

The question has to do with Barbie and its history, particularly in developed markets like the United States early in the decade and the turnaround in recent periods in mature markets. The fact is the Barbie brand is growing again. I think on a year-to-date basis in the U.S., Barbie's sales are up around 7%. That's on top of probably a 14% increase last year and an increase the prior year. So early in the turnaround, I would say, it's a little too early to get excited. We've been doing this. Now this will be our third year of good Barbie performance. Simply stated, Barbie got cool again and relevant. And I think it is consistent with how we are viewing our business broadly today. There was a time when we talked about a toy, Barbie or almost any other toy, we talked almost exclusively about the features and the benefits of those features to the consumer. Even if you look at the Fisher-Price advertising over the past decade, it's a little bit too feature-focused. We figured out on Barbie -- really starting here in New York with Fashion Week several years ago when Barbie stole Fashion Week in the fashion capital of the world. That was the beginning of the cultural relevance and positive noise around Barbie. And the group that manages Barbie has done an exemplary job of understanding, not only the features of the toy, but really the importance of the entire brand and keeping Barbie cool again. It's tough to do. There's no question that when a brand is a little uncool, you've got a tremendous uphill battle. But I am thrilled with how the group has delivered on the notion of making Barbie cool again; it's worked. Bryan?

Bryan G. Stockton

I think Bob captured most of it. I think it's a lot of consumer insights. We spend a lot of time and energy in trying to understand the consumer. That's what drove the Barbie turnaround. We literally took that same approach and formula, if you will, that we used on Barbie and translated it to Fisher-Price to really understand the Fisher-Price consumer. And that's why we're feeling positive about what we're seeing in Fisher-Price early on. We think that's a great example of how we try to leverage the scale of Mattel and transfer best practices across divisions and brands and countries. That's what makes us, we think, a great place to work, because we're not afraid to take a great idea that was in Germany and transport it over to the U.S., for example. So I think it's a great example of how we're working much closely as a team.

Robert A. Eckert

In the back.

Unknown Analyst -

Could you talk about whether you're seeing the same bifurcation in the consumer behavior that other consumer products companies have talked about? And how you address that? It seems like the lower end, people are spending less; in the higher end, people are getting more disposable income. So how -- do you see that given the stability that you've talked about in your category? And how do you address that without losing some of that cool and some of that cache that comes with taking over Fashion Week and American Girl having these great products?

Robert A. Eckert

I'll start, and then let Bryan continue. The question goes to the bifurcation of the consumer spending, particularly in developed markets of the more wealthy, affluent consumers out shopping heavily, and the middle group of consumers struggling right now in this economy. We see it in the toy business, but it's not as pronounced as it would be in many other categories. Remember the average toy cost $10 or $15 at retail. So even though we have some relatively larger bigger ticket items in American Girl today cost $100 at retail, I mean, to us $100 is a lot of money. But if you go to as many stores as we do and go a little bit outside of the toy aisle, which every once in a while we do, and look at what's out there, $100 is not the end of the world. It's expensive, but it's not the end of the world. As I've mentioned, I've been as surprised as anyone on how well American Girl, specifically, has done in this environment. As Bryan mentioned, this isn't a doll with a lot of features. It doesn't have some new benefit in terms of the physical product each year. The company -- the American Girl group has consistently grown in this environment. They understand their consumers really well, and they're very effective and efficient at marketing to those consumers, with new stories, new ideas, new formats, new stores, new things going on in the stores. And I'm just amazed when I am here in New York and when I'm visiting Chicago, which I do often, to be around the American Girl stores and see those red bags. They are everywhere. And these girls are all smiling, and they have their friend American Girl doll with them. So we do see some of this marketplace. Certainly, our customers have seen it. Our retail customers have seen it. But I don't think it's as pronounced as it might be in other categories, because at the end of the day, probably the #1 selling SKU in the toy business will be basic Hot Wheels Cars again this year, and a Basic Hot Wheels car cost a little over $1 right now.

Bryan G. Stockton

Bob, I'll pick on the extremes. If you look at the Barbie Dream House, which is well over $100 this year, it seems like it's off to a pretty good start this year, but it's all about delivering play value at any price. So we've got a higher end and Hot Wheels, which is at the low end of the price range, we have to deliver play value. So it's really about not necessarily the exact price, but are you delivering value that kids recognize and parents recognize. The other thing that's interesting is it's relative play value, and I'll pick on Hot Wheels as an example. In the U.S. Hot Wheels sells for just a little over $1. We have some countries, for example, Brazil, where Hot Wheels sells for about USD $4. That's a very expensive market because of duties and taxes, but we're competing with other things. That is still a huge success in a market with a price point like that, because we're delivering play value in the Brazilian market that they recognize at that level. So whether it's a low price or high price, you have to deliver the play value.

Kevin M. Farr

And I guess I'll just to add to that. I think because we have to reinvent ourselves each and every year, we can readjust our price points to reflect what consumers want. I know we've done that several years ago with regard to Fisher-Price. 2/3 of our line was high priced, and 1/3 was low priced. And in 2010, we flipped that to respond to consumers and what they wanted to spend.

Unknown Analyst -

Couple of questions on HIT. Winning Thomas has a unique distribution channel, a lot of specialties, specialty nooks and crannies. Are you set up for that now? Or is there investment you're going to have to make to do that sort of distribution once you get control of that? Or will you be given some that margin to, say, Rapster [ph]? How will you handle that?

Robert A. Eckert

The question goes to the distribution of wooden toys out of the Thomas line. It has some mass sales, but it also has sales to the more specialty toy and hobby shops. It's a little early to talk about the specific plans. But we don't see its distribution channels as any sort of significant obstacle for us.

Unknown Analyst -

Okay. And any plans to make that more of a mass-market brand, the wooden Thomas?

Robert A. Eckert

Again, it's a little early to talk about our specific plans for Thomas. And I think I'm just going to have to leave it at that for now.

Unknown Analyst -

Okay. The worldwide portfolio of HIT toys out there is somewhere in the order of $300 million to $400 million, so do you guys, as these licenses roll off, do you have the capacity to take on those -- the production in-house? Will it require more CapEx? Or will you use outsourced manufacturers? How will you execute that transition?

Robert A. Eckert

I think when we talk about the brands beyond Thomas and the HIT portfolio, which is what the question is about, we will look at it case-by-case, brand-by-brand, geography-by-geography and come to conclusion in each one of those sales in the matrix, if you will, on whether we want to do more of that brand or we want to outsource more of that brand. So we've never found that manufacturing capacity is a limiter in the toy business. We make about half of our own toys and outsource about half of the toys we sell. So whether we choose or not to manufacture in-house is an economic decision, it's not really governed by anything else. And we are comfortable as we speak with the footprint that we have in manufacturing. So it's too early to sort of opine much beyond the fact that we're comfortable with it. And I don't see the addition to the portfolio as having a significant impact on our footprint of manufacturing. Just as, as we got more licenses in over the past couple of years, we didn't see a significant impact. Now we have spent capital in our plants over the past year or two, because we were out of capacity on important things like dolls. So as Barbie continued to do well, while Princess from Disney was doing well, while MONSTER HIGH was exploding, that tested our internal manufacturing capacity, so we have increased the volumes that those plants are able to do. But to me, that's sort of an ongoing normal kind of decision one makes as opposed to let's start with a greenfield and build a new production facility.

Bryan G. Stockton

I think with respect to that, like plastic manufacturing in our wheelhouse, we do, do that very well, so we would look at what's the benefit of bringing it in-house, what's the capital requirement for doing that. I think a lot of things that we've doing over the last couple years is creating capacity in our own facilities through lean and through the level of automation. So we've obviously, since these things are in our wheelhouse with regard to the processes, we look at over time should we bring that in and avoid the vendor profits and, actually, benefit from our ability to do this faster and better than anybody else. But I don't see that as that as a significant capital investment.

Unknown Analyst -

Okay. The acquisition is purely intellectual property, no [indiscernible] or anything from [indiscernible] specificity. How did you make Barbie cooler? How did that team make Barbie cool again? And how are you making Fisher-Price cool again? Just more detail on that would be really little helpful.

Robert A. Eckert

Bryan? The question is, how did they make Barbie cool again?

Bryan G. Stockton

It's a great question and really -- it really speaks to getting reconnected with the consumer. And one of the things that we found out with Barbie is that people have really positive feelings about Barbie, but we weren't really reflecting her coolness and her relevance in the marketplace. Bob mentioned Fashion Week. Barbie is a fashion icon, and we were quite pleased that the response we got from a number of fashion houses around the world about how great Barbie is, and they wanted to do programs with Barbie. So we were not only in runways here in Europe, but all over the world, in Milan, and she really became quite popular. So that kind of created this cultural conversation that we talk about with Barbie. The second thing is getting back to the basics of what Barbie is all about. Barbie is about aspiration, letting girls live their dreams and think about their futures through eyes of Barbie. And so we really focused on the strengths of Barbie. Like the "I Can Be" line. Barbie has I think 127 or 128 careers now. So we've refocused on all those things that Barbie can be that helps girls imagine what they can be. So it's really getting back to the fundamentals, having fun with the advertising. And Bob said it wasn't feature benefit kind of advertising. It really became fun. So Barbie was cool. On Fisher-Price, again, it's reconnecting and really understanding there's a difference, a huge difference, between boomer moms and Gen-Y moms and Gen-X moms. They're very different. And the mom today doesn't want to be the perfect planful mom that my mother was and that my wife was to my kids. It's a very different environment and field. So we have to communicate with them differently. The content is different. They need advice. They want to know that there's a best friend helping them. And we need to communicate not just through television, but we need to communicate digitally. So we have to get the right message in the right form to moms to connect, and really, let mom know that we understand what they're all about and what they're doing. So again, it gets past the superficial look of consumers. It's really understanding what drives their minds when they think about how they're playing or how they're trying to nurture their child.

Kevin M. Farr

Yes. And I think also, I'd add to that and I think it's consistent with what you said, Bryan. I think it's the way we're communicating and how we're communicating. So I think digital media is much more important. So talking to mom at digital media for Fisher-Price. I think what we did differently too with regard to Barbie is we really talked to the consumers where they were. They were on the Internet. We did it through Facebook, through Twitter, through social media. So I think it's also how we talk to people and what content we pushed out to them to make Barbie more cool.

Unknown Analyst -

Toys"R"Us is making some changes to its floor space, emphasizing more infant and preschool. Can you talk about the opportunities, implications for Fisher-Price there? And then the second question, going back to Thomas, the wooden license, what is the geographic footprint look like for that business today? And talk about the opportunities in Asia and Latin America with that business.

Robert A. Eckert

Okay. There's 2 questions. One is Toys"R"Us and how it is laying out its stores, supporting the infant and preschool business? And the second thing goes to the geographic expansion opportunities for the wood business in Thomas. Bryan?

Bryan G. Stockton

Thanks, Bob. I think what you're seeing in the case of Toys"R"Us and many of our other retail partners around the globe is a response to this growing category of baby, infant and preschool. As I said, it is the largest and it's been a pretty consistently high-growth category at retail. So I think you're seeing their response. And if you look around the world, you would see other retailers responding in a very similar way. We've talked about our focus. Our focus is right in the sweet spot, 0 to 3, on Fisher-Price. And that's where we like to be, and that's where the large part of our -- growth of our business is. So we view it as a great opportunity, not just for Toys"R"Us, it is a terrific business partner with us around the globe, but with other retailers who are heading in that direction. As it relates to Thomas, Thomas, as you can imagine, having been born in the U.K. is quite strong in English-speaking countries. It's also strong in Western Europe and has a pocket of strength in Asia and Japan. So one of the opportunities we have, as Bob said, creating better toys, we should see we think more positive sales in those core geographies today. And we have the opportunity to expand Thomas through more relevant content for some of these markets, getting the content placed and getting the toy lines and consumer products, because it is such an important part of that franchise in the marketplace.

Kevin M. Farr

I guess I'd add to that. So if you look at the $180 million of HIT's revenues, about 2/3 of that is licensing and 1/3 of it is home entertainment. And when you look at Thomas, it's really got a more robust consumer product business. It's about 75% consumer products. 1/4 of it is home entertainment, and when you look at that consumer products, slightly less than half of that is toy. And when you look at the geographical mix of HIT, 50% of it is North America, about 1/4 of it is Asia and 1/4 of it is Europe, with the U.K. being the biggest. And I think as we've seen with these entertainment licenses that we took with regard to plastic and diecast, it is clearly more U.S. than global. And I assume that wood is the same. I don't have specific facts around it, but I do think there's an opportunity obviously to grow wood outside the U.S. given our global scale and our ability to reach markets around the world like nobody else can.

Robert A. Eckert

So in closing, whether you're joining us here live today, in person in New York City or anywhere over the worldwide web, I do want to thank you for giving us your time today. I hope we've been informative as we talk about, why toys, why Mattel and why now. And hopefully, you'll come away with a better perspective on why we think there are great opportunities here. Thanks very much, and have a wonderful day.

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